Economy

Base rate rise puts £700 a year on average mortgage

Base rate rise puts £700 a year on average mortgage”

Mr Hollingworth said: "We have got to caveat that with 'who knows?', but what it does do is give them a solid foundation for planning when they come out of that fix - whether that is overpaying or getting their finances ship shape so they are in a better position to deal with whatever the market looks like in five years". The markets are "pricing-in" a 91.2% probability of a rate hike today.

The lender has confirmed that variable rate mortgages, including its Standard Variable Rate (SVR) will go up by 0.25% from December 1, if the Bank of England moves as expected and raises the base rate. Recent data has indicated that the United Kingdom economy is performing better than expected, with growth rising to 0.4% in Q3 which, to many, is an indication that a rate hike will not adversely affect growth. We are still waiting to hear what the big banks will do with their savings rates, but some players have already said they will put some of their rates up, including Nationwide, TSB and Yorkshire Building Society. So we are all a little bit worse off. "And that is not what the governor said yesterday either".

And Bank of England governor Mark Carney warned that the rate was likely to rise twice more over the next three years.

Concerns had been expressed that SVR borrowers would feel a significant impact as a result of the rate increase.

So caution is the watchword.

The reluctance is at odds with comments from Theresa May's official spokesman, who said on Thursday: 'Following the rate rise, we would expect to see higher interest rates to be passed on to savers'.

Those on trackers will see their monthly repayments rise nearly immediately, while those who locked into fixed-rate deals will finally start seeing the benefit of paying a slightly higher rate in return for security.

As well as the low base rate, schemes such as funding for lending have been blamed in recent years for depressing savings rates further, as banks have been less reliant on needing to attract savers' cash with attractive rates.

Millions of borrowers on variable rate deals will be impacted by the decision, which will add around £15 a month to the cost of the average mortgage.

The average house price across the Black Country boroughs of Dudley, Walsall, Sandwell and the city of Wolverhampton varies between around £140,000 and £170,000, rising over £200,000 in Staffordshire.

The central bank warned uncertainty presented by the UK's break from Brussels was still weighing on domestic activity and that future hikes would be more "gradual". This is because the accounts are not linked to bank rate, it said.

Further rate rises are expected by some to be slow-moving, in stages of 0.25% and reaching 1% by 2020. "Another possiblity is that people who are struggling now might want to borrow more because wages rates are falling".



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